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The travel and hospitality industry in India is a multi-billion diverse sector driven by factors like disposable income and has attracted the attention of global investors. Recently domestic tourism has been extremely buoyant. Indians are traveling across the length and breadth of their vast country for leisure tourism, for events and weddings and to experience spirituality. Government schemes like Swadesh Darshan, PRASAD and promotion campaigns like Dekho Apna Desh have aided the strengthening of domestic tourism in the country. On the other hand, there have been efforts to improve inbound tourism by hosting international events. India’s G20 presidency of 2023, and the Cricket World Cup 2023 among other events have contributed to marketing India globally as a preferred destination for leisure, business, and MICE alike.
The potential of Inbound international travel is huge. It is heavily dependent however on the attractiveness of a destination and how it is perceived by the discerning traveller. This requires a well-curated marketing and promotion plan in target source markets. International travel is becoming more regional and fewer people are going in for long-haul travel. India would therefore do well to promote itself more aggressively in the Asia Pacific region. Incentivising travel could be one way. Several countries are wooing Indian traveller through hassle-free and complimentary visas and similar incentives. To receive its fair share of travellers, India should follow suit and position itself as an attractive destination with better value for money, in comparison to the competing destinations in the eyes of the regional traveller.
The Indian hotel market has significant growth opportunities and is poised to contribute $1,504 billion to the country’s overall GDP by 2047, from $65 billion in 2022, as per a report released recently by the Hotel Association of India. As the industry continues to grow, it becomes imperative for the government to take significant measures to propel its development further and realise the full potential of the Sector.
The Union Budget 2023 provided a significant boost to tourism through its multi-faceted mission mode focusing on building more airports and increasing the budget for railways, roads, waterways, and infrastructure development. Improved last-mile connectivity has uplifted tourism in remote unexplored domestic destinations. It is important that the momentum be maintained in the upcoming Interim budget 2024-2025 by announcing policies that will support the demonstrated resilience of the sector and foster the expansion of hotels to bridge the huge gap between the supply of rooms and their corresponding demand.
Over the years, the industry has been advocating rationalisation of taxes, monitored mechanisms for incentives, and easy availability of finance especially to small and medium-sized enterprises.A primary concern consistently expressed by the industry over the years has been the restructuring of indirect taxes, particularly the Goods and Services Tax (GST) on hotel tariffs and restaurant services within hotels. The current GST rate of 18% is comparatively higher and should be reduced to a more globally competitive rate of 12%. This rationalization is seen as vital for bolstering the global competitiveness of Indian hotels and attracting an anticipated 100 million foreign tourists. Aligning with benchmarks observed in competing destination countries like Singapore, and Thailand, where hotel taxes range between 5-7%, would be one of the ways to position India as an attractive destination, particularly for inbound travel.To encourage greater ‘Atmanirbharta’ or local investments, the hospitality sector is looking forward to hotels being accorded the status of an infrastructure industry on the lines of sectors like highways, ports, etc as hotels create key tourism infrastructure of tourist accommodation. Tourism is a state subject and Govt of India is encouraging States to grant hotels the benefits offered to manufacturing industries. The benefits of an industry will allow hotels the advantages of lower utility tariffs, lower property tax, easier access to finance, softer loans, and ease of doing business thus reducing the cost of doing business significantly. This will reduce the gestation period for hotels and make the return on hotel investments more attractive.
In addition to the policy interventions to accord hospitality the status of infrastructure at the Centre and allow hotels the benefits available to Industry at the State level, there are other imperatives that will encourage investments. A key step is improving the ease of doing business by reducing the number of approvals, licenses and classification-related issues required for hotel projects and hotel operations. Hotels are burdened not just with the requirement of a large number of licences but the process of acquiring the same is often tedious and very expensive. Creating a single window for all approvals with a timebound system of granting them will infuse efficiencies and economies for rapid hotel growth and development.
On one hand, Hotels are capital intensive, have long gestation periods, and are burdened with a large component of fixed operational costs. on the other hand, they are people centric. Enhancing the skills of the tourism workforce is crucial for delivering high-quality services and experiences to visitors. Continued government investment in skill development Is critical to the sector’s growth and providing direct and indirect employment opportunities.
Encouraging sustainable practices in the tourism sector is important to preserve the country’s natural and cultural heritage. The government should focus on allocating funds to promote eco-friendly accommodations, and tourist sites and introduce incentives for industry players aligned with the United Nations Sustainable Development Goals. This will not only contribute to the long-term preservation of India’s tourism assets but also generate positive engagement with conscious travellers. We should not over-promote destinations that kill the potential of the location and harm the environment.
The tourism and hospitality industry is a key contributor to the country’s GDP. The recent government focus on the sector is commendable. It should be supported by policy announcements that are imperative to the industry’s continued, healthy, and sustainable growth. India has stepped into the “Amrit Kaal” on the country’s 75th Independence Day and embarked upon the journey of realising the vision of 2047 for a ‘New India’- A developed nation as it turns 100. The restructuring of the Indian economy through rapid and inclusive growth, better living conditions for all, and infrastructural and technological advancements can be best achieved by unleashing the huge and under-tapped potential of hotels in creating jobs – jobs that are direct and across all skill sets, jobs for the differently abled and for women. The higher multiplier effect of the sector also creates a large number of indirect jobs and the ripple and cascading effect in the economy is significant and cannot be overlooked.
(K.B. Kachru, Chairman Emeritus and Principal Advisor, Radisson Hotel Group South Asia)
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